{"id":103592,"date":"2020-06-16T16:29:44","date_gmt":"2020-06-16T23:29:44","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=103592"},"modified":"2020-06-16T16:29:44","modified_gmt":"2020-06-16T23:29:44","slug":"central-bank-vs-leasing-companies","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/06\/16\/central-bank-vs-leasing-companies\/","title":{"rendered":"CENTRAL BANK vs LEASING COMPANIES"},"content":{"rendered":"

By M D P DISSANAYAKE<\/strong><\/em><\/span><\/h2>\n\n\n

The\nregistered leasing companies are under legal obligation to carry out the latest\nround of instructions of the Central Bank, as directed by President.<\/p>\n\n\n\n

But\nunregistered leasing companies are not bound by the rules of the Central\nBank  as such the Central Bank also cannot enforce the new rules on them.\nBut the unregistered leasing companies cannot continue their operations,\nwithout cash inflow.  As they are unregistered, some commercial banks and\nfinancial institutions have entered into agreements with these companies to\nprovide the working capital.   It is also evident  that these\ncompanies have been importing three wheelers based on usance letters of Letters\nof  Credit, with 90 to 180 days payback period, based on approvals granted\nby the first-class commercial banks, to endorse the Letters of Credit. But most\nof these imports were based on Sight Letters of Credit as well.<\/p>\n\n\n\n

The\nBanks hold the vehicles as collaterals  and the leasing companies are duty\nbound to their lending institutions to seize the vehicles  for payment\ndefaults by the Lessees.  The Lessors might have provided personal\nguarantees or pledged their freehold properties to the Banks  as an\nadditional security.<\/strong>  Under leasing arrangements, the ownership of\nthe property does not pass on to the Lessee, until the final payment and\nrelease.<\/strong><\/p>\n\n\n\n

The\ncommercial banks provide working capital to the unregistered leasing companies\nat very high interest rates, due to risk factors<\/strong><\/p>\n\n\n\n

So,\nin this issue, the parties involved are commercial banks, lessors and lessees.<\/p>\n\n\n\n

The\nGovernments intention is to cut the red tape and offer immediate help to the\nlessees, so that they can use the vehicles, generate positive cash flow,\nmake their livelihood  and pay back loan instalments.<\/strong><\/p>\n\n\n\n

The\nfollowing alternatives could be looked at immediately<\/strong>, to provide relief\nto the aggrieved parties:<\/p>\n\n\n\n

1.      The\ngovernment should guarantee through a <\/strong> salvage package to the\ncommercial banks which provided funds to the unregistered leasing\ncompanies.  This means Banks will have a fall-back for recovery of the\ndebt, if the unregistered companies are unable to pay back principal plus\ninterest;<\/p>\n\n\n\n

2.      Immediate\nrelease of all vehicles to the Lessees which have been seized<\/strong>;<\/p>\n\n\n\n

3.      The\ngovernment should set up an Interest Subsidy Scheme, so that for a specific\nperiod<\/strong>,  interest rates shall become current market rates as\nequivalent to the rates offered by the registered leasing companies;<\/p>\n\n\n\n

4.      The\nrelevant commercial banks should open  Escrow Account ( a Trust Account)\nfor the relevant parties, the Lessee should deposit monthly or periodic\nrepayments to the Escrow Account.  The commercial bank will monitor and\nmanage the account and ensure periodic payments are also distributed  to\nthe Lessors so that they can remain in business; <\/p>\n\n\n\n

This ensures, Cash Inflow to commercial banks,\nLessors as well as keeping Lessees gainfully employed.<\/p>\n\n\n\n

These changes can be incorporated into an\nExtraordinary Gazette to become effective immediately.<\/strong><\/p>\n\n\n\n

 The\nchanges required for the existing laws can only be amended after the formation\nof the new Parliament .<\/p>\n","protected":false},"excerpt":{"rendered":"

By M D P DISSANAYAKE The registered leasing companies are under legal obligation to carry out the latest round of instructions of the Central Bank, as directed by President. But unregistered leasing companies are not bound by the rules of the Central Bank  as such the Central Bank also cannot enforce the new rules on […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[63],"tags":[],"class_list":["post-103592","post","type-post","status-publish","format-standard","hentry","category-dr-m-d-p-dissanayake"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/103592","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=103592"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/103592\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=103592"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=103592"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=103592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}